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A cynical optimist’s take on the Inflation Reduction Act.
The optimistic case for the Inflation Reduction Act — even under a Trump presidency, even with a Republican trifecta in Washington — rests on a “public investment first” view of climate policy. Public investment in the clean energy economy is not merely a second-best policy option to carbon pricing or other punitive regulations, the argument goes, but instead the first-best option in the marathon of politically durable decarbonization.
I am an outspoken proponent of this view. Public investment provides and encourages investment to drive down the cost of clean energy technologies, make them more market-competitive, and thereby reduces emissions by permanently shifting demand away from fossil fuel-dependent ones. Public investment in clean energy technologies can also create the conditions for new constituencies to gain political clout and defend their role in the economy, and for further policy ambition in the future.
The first major sign that public investment under the IRA might prove durable came in August, when a group of 18 House Republicans wrote to Speaker Mike Johnson in support of the clean energy tax credits that are the cornerstone of the legislation, emphasizing the job creation benefits of the policy. Even the American Petroleum Institute and U.S. Chamber of Commerce said back in May that they would support the IRA under a Trump presidency. Driving down costs? Check. New constituencies? Check.
It’s tempting to see this glimmer of change in favor of clean energy incentives as the consequence of groundswell political support, as voters see benefits arrive in their communities. Journalist Kate Aronoff calls this “pool party politics," named after the New Deal’s high-visibility spending on public pools which curried popular favor in the 1930s. The IRA’s benefits do tilt heavily toward red districts, so it would be nice to imagine that Republican elected officials are hearing bottom-up support and dutifully reflecting constituent interest — democracy in action.
Let’s call that the optimist’s view. My view, which one might call the “cynical optimist’s,” is that politicians — red or blue — are often more responsive to the concentrated interests and influence of lobbyists and donors than the electorate. The IRA may have gained popularity in Congress, including among Republicans, as financial and corporate interests — “capital” — started becoming IRA fans. Tim Sahay of the Net Zero Policy Lab at Johns Hopkins has called the IRA’s tax credits a “bottomless mimosa bar” for the financial market, and bankers are swanning up to get smashed on unlimited tax incentives for clean energy investment.
I favor the cynical optimist’s view because I believe it to be a more accurate picture of why the IRA is good politics. The “cynical” part recognizes that capital exerts disproportionate influence over the political process; the “optimist” part celebrates that the IRA is a powerful vehicle to appeal to their economic values. Bottomless mimosa bars aren’t just booze giveaways — they work by bringing in new customers who then stay and pay for their meals. Reformulating the interests of capital through public investment is a pragmatic and necessary antidote to the inertia of the incumbent fossil fuel industry.
A great example of the IRA gaining new types of fans is its program of expanded, transferable clean energy tax credits. Not only do these tax credits redirect tax revenue toward clean energy investment, making more projects economically justifiable, they may also develop their own market momentum. I advise Basis Climate, a platform for clean energy tax credit transfers, and when I asked co-founder Erik Underwood to tell me who is actually buying these tax credits, he told me it has mostly been savvy business people focused on minimizing their tax payments. Many of these buyers have never or only marginally participated in renewable energy deployment previously.
The tax credit transfer market has grown to $20 billion to 25 billion in a mere 20 months. By comparison, voluntary carbon markets have for decades attempted to enable green projects by creating a market for tradeable credits, yet the market is expected to reach just $2 billionglobally in 2024.
In other words, the market for clean energy tax buyers has vastly expanded the base of corporates benefiting from and supporting clean energy projects, led by transactional people who want to avoid paying taxes. Now, there are tax-hating business types of all political colors, but one can already see that the politics of the IRA are shaping up differently than, say, a pollution tax that steadily gets harsher over time.
All that said, it is important not to overstate the case in favor of the IRA’s durability. Those 18 House Republicans are down to no more than 14 post-election, and the remainder may find that falling in line with the President politically safer were he to mount a full-scale attack on the IRA. They and corporate America may also love clean energy tax credits in the abstract but happily give them up to pay for a juicy tax cut for the wealthy.
Still, the most clearly durable part of the IRA are the $78 billion in public spending and whopping $493 billion in business and consumer energy investment that it has already catalyzed as of June 2024, an estimated 71% increase in private investment from the two years before the IRA. That investment won’t be undone with policy change, and it will radically change the economics of many clean energy technologies. It also lays the foundation for later policymaking, as distant as that possibility may now feel. By creating an expanded tent of clean economy interests, the “carrot” of public investment may also help future politicians and their constituencies find “stick” policies more feasible. Penalties on high-carbon products — from gas cars to steel — become much more palatable if they are merely driving substitution to other technologies that compete on price and quality, than if they’re just making the only serviceable option more expensive.
This more nuanced telling of the politics, though, means you don’t need a star-eyed, Mr. Smith Goes to Washington view of the American political process to see how the IRA is delivering political dividends. Whatever the fate of the IRA come January, the longer the benefits flow — to communities and to capitalists — the more difficult it will be to roll back the tide.
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A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.
Long Islanders, meanwhile, are showing up in support of offshore wind, and more in this week’s edition of The Fight.
Local renewables restrictions are on the rise in the Hawkeye State – and it might have something to do with carbon pipelines.
Iowa’s known as a renewables growth area, producing more wind energy than any other state and offering ample acreage for utility-scale solar development. This has happened despite the fact that Iowa, like Ohio, is home to many large agricultural facilities – a trait that has often fomented conflict over specific projects. Iowa has defied this logic in part because the state was very early to renewables, enacting a state portfolio standard in 1983, signed into law by a Republican governor.
But something else is now on the rise: Counties are passing anti-renewables moratoria and ordinances restricting solar and wind energy development. We analyzed Heatmap Pro data on local laws and found a rise in local restrictions starting in 2021, leading to nearly 20 of the state’s 99 counties – about one fifth – having some form of restrictive ordinance on solar, wind or battery storage.
What is sparking this hostility? Some of it might be counties following the partisan trend, as renewable energy has struggled in hyper-conservative spots in the U.S. But it may also have to do with an outsized focus on land use rights and energy development that emerged from the conflict over carbon pipelines, which has intensified opposition to any usage of eminent domain for energy development.
The central node of this tension is the Summit Carbon Solutions CO2 pipeline. As we explained in a previous edition of The Fight, the carbon transportation network would cross five states, and has galvanized rural opposition against it. Last November, I predicted the Summit pipeline would have an easier time under Trump because of his circle’s support for oil and gas, as well as the placement of former North Dakota Governor Doug Burgum as interior secretary, as Burgum was a major Summit supporter.
Admittedly, this prediction has turned out to be incorrect – but it had nothing to do with Trump. Instead, Summit is now stalled because grassroots opposition to the pipeline quickly mobilized to pressure regulators in states the pipeline is proposed to traverse. They’re aiming to deny the company permits and lobbying state legislatures to pass bills banning the use of eminent domain for carbon pipelines. One of those states is South Dakota, where the governor last month signed an eminent domain ban for CO2 pipelines. On Thursday, South Dakota regulators denied key permits for the pipeline for the third time in a row.
Another place where the Summit opposition is working furiously: Iowa, where opposition to the CO2 pipeline network is so intense that it became an issue in the 2020 presidential primary. Regulators in the state have been more willing to greenlight permits for the project, but grassroots activists have pressured many counties into some form of opposition.
The same counties with CO2 pipeline moratoria have enacted bans or land use restrictions on developing various forms of renewables, too. Like Kossuth County, which passed a resolution decrying the use of eminent domain to construct the Summit pipeline – and then three months later enacted a moratorium on utility-scale solar.
I asked Jessica Manzour, a conservation program associate with Sierra Club fighting the Summit pipeline, about this phenomenon earlier this week. She told me that some counties are opposing CO2 pipelines and then suddenly tacking on or pivoting to renewables next. In other cases, counties with a burgeoning opposition to renewables take up the pipeline cause, too. In either case, this general frustration with energy companies developing large plots of land is kicking up dust in places that previously may have had a much lower opposition risk.
“We painted a roadmap with this Summit fight,” said Jess Manzour, a campaigner with Sierra Club involved in organizing opposition to the pipeline at the grassroots level, who said zealous anti-renewables activists and officials are in some cases lumping these items together under a broad umbrella. ”I don’t know if it’s the people pushing for these ordinances, rather than people taking advantage of the situation.”